Blue chips slammed by drug sector

Published 5:30 am, Friday, June 22, 2001

NEW YORK -- Stocks fell today as the corporate-earning warnings that have plagued the market in recent weeks spread to a pillar of defensive investing -- drug giant Merck & Co Inc.

The Dow Jones industrial average dropped 110.84 points, or 1.03 percent, to end at 10,604.59, according to the latest data, and the Nasdaq composite index fell 23.93 points, or 1.16 percent, to 2,034.83. The benchmark Standard & Poor's 500 index fell 11.69 points, or 0.94 percent, to 1,225.35.

"You have to expect that your average company that you are investing in is going to have a profit warning," said John Forelli, senior vice president at Independence Investment LLC, which oversees $25 billion. "When one company makes an announcement, everybody is going to extrapolate it to the other companies in that industry."

Merck tumbled almost 9 percent, or $6.67, to $67.80, to a three-month low after warning it would miss earnings targets for the quarter and year because of sluggish sales of its key arthritis drug Vioxx and the strong U.S. dollar.

The decline accounted for 40 percent of the Dow's drop, and pushed the blue-chip gauge into negative territory for the week.

For the week, the Dow fell nearly 0.2 percent, the Nasdaq gained one-third of a percent and the S&P 500 added 0.9 percent. Year-to-date, the Dow is down 1.7 percent, the Nasdaq composite off 17.6 percent and the S&P 500 down 7.2 percent.